This post is from the RenounceUScitizenship blog.
This is the eighth of a series of posts – starting with Cook v. Tait 1 – about citizenship-based taxation. A recent article by Allison Christians “Drawing the Boundaries of Tax Justice” is a must read. The article is notable because it considers tax policy without adopting any of the usual assumptions. In fact, the article invites you to reexamine your assumptions about the principles of taxation. The article asks a number of questions including the obvious: who should be taxed, why, and what is the basis for taxation. Although the article is NOT specifically about citizenship- based taxation, it raises the question about its appropriateness.
RT @fatca_fallout Drawing the Boundaries of Tax Justice bit.ly/Y1a91FCharacterized by arbitrariness & injustice
— U.S. Citizen Abroad (@USCitizenAbroad) April 24, 2013
An excerpt from the article that is a useful contribution to the analysis of “citizenship-based taxation” is:
Citizenship or nationality might seem like an appropriate place to start in thinking about the state’s right to tax to the extent the category indicates the individual’s (and perhaps by proxy the entity’s) choice to identify with a state as a matter of political allegiance. The suggestion is that citizenship is a brand of identification that signifies a positive undertaking—lodged in legal terms—to mark a person as belonging to the state. However, this is a difficult, perhaps impossible, argument to sustain in a world in which globalization has redrawn the boundaries of human community so that people can easily be branded as a citizen by multiple states. This simultaneous branding dilutes the citizenship category so much that it cannot easily serve to distinguish among competing jurisdictional claims.
Citizenship’s brand dilution is reflected in conflicting state practices when it comes to identifying taxpayers. With few exceptions, states routinely reject citizenship as the best normative explanation for the state’s exercise of taxation over the person. The one state that imposes taxation on the basis of citizenship in all cases—the United States—is routinely criticized for this position, since the act is hostile to other jurisdictional claims that the United States otherwise acknowledges as valid.
DRAWING THE BOUNDARIES OF TAX JUSTICE – Allison Christians
Although citizenship-based taxation is not okay for the rest of the world it is somehow okay for the U.S. What would be the the U.S. reaction if other countries subjected U.S. residents to taxation? What would be the consequences? This was explored in Don Whitely’s article:
Countries use residence based taxation, in part, because they recognize that they are part of a global village – that is part of a world. Does the United States view itself as part of the world? If citizenship-based taxation is any indication, the United States views itself as the world! On the back cover of Stone’s “The Untold History of America” you will find an interesting comment from Mikhail Gorbachev.
“At stake is whether the United States will choose to be the Policeman of a “Pax Americana”, which is a recipe for disaster, or partner with other nations on the way to a safer, more just and more sustainable future”.
Stop citizenship-based taxation! Repeal FATCA!
a couple of interesting posts:
GAO Report Targets Strategies Other than OVDP (4/26/13)
Hale Sheppard Article on Willful FBAR Penalty Cases (4/26/13)
“…states have (perhaps unwittingly) created three subcategories of taxpayers and income, namely, the easy-to- tax, the hard-to-tax, and the impossible-to-tax. Moreover states consistently choose to tax the easy-to-tax more or less comprehensively, the hard-to-tax more or less randomly, and the impossible-to-tax not at all. These categories are constructed and reconstructed regularly: states perpetually reassert the boundaries of taxation through the ongoing process of domestic and international norm creation and implementation, all built cumulatively on the policy failures of the past.”
Canada at least recognizes that it’s not practical to tax extraterritorially, and is perhaps it’s for the same reason that the US hasn’t enforced citizenship based taxation thus far. FATCA is a solution to these impracticalities, a break in the “boundaries of taxation through the ongoing process of domestic and international norm creation and implementation”… just force foreign governments and financial institutions to do all the work for you! FATCA turns the hard-to-tax into the not-so-hard-to-tax in an instant! Perhaps we should come up with a cute name for the way US taxpayers evade paying taxes in Canada, something like the double-irish-dutch-sandwich, maybe the terror-frozen-ostrich?
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